1. Main points

Construction output contracted by 0.9% in the three-month on three-month series in September 2017, but remains at relatively high levels.

This fall of 0.9% for Quarter 3 (July to September) follows a decline of 0.5% in Quarter 2 (April to June), representing the first consecutive quarter-on-quarter decline in current estimates of construction output since Quarter 3 2012.

The 0.9% decline in output was due to decreases in both repair and maintenance, which fell 1.4% and all new work, which fell 0.7%.

Construction output fell 1.6% month-on-month in September 2017, stemming from falls of 2.1% in repair and maintenance and 1.3% in all new work.

The estimate for construction growth in Quarter 3 2017 has been revised down 0.2 percentage points from negative 0.7% in the preliminary estimate of gross domestic product (GDP), which has no impact on quarterly GDP growth to one decimal place.

2. Things you need to know about this release

The monthly business survey, Construction output, collects output by sector from businesses in the construction industry within Great Britain. Output is defined as the amount chargeable to customers for building and civil engineering work done in the relevant period excluding Value Added Tax (VAT) and payments to sub-contractors.

The survey’s results are used to produce seasonally adjusted monthly, quarterly and annual estimates of output in the construction industry at current price and at chained volume measures (removing the effect of inflation). The estimates are widely used by private and public sector institutions, particularly by the Bank of England and Her Majesty’s Treasury, to assist in informed decision-making and policy-making. Construction output is an important economic indicator and is also therefore used in the compilation of the output measure of gross domestic product.

This September 2017 release contains revisions for July 2017 onwards. This means that we have incorporated additional data since this period.

Revisions can be made for a variety of reasons, the most common include:

late responses to surveys and administrative sources, or changes to original returns

forecasts being replaced by actual data

revisions to seasonal adjustment factors, which are re-estimated every month and reviewed annually

On 11 December 2014, the UK Statistics Authority announced its decision to suspend the designation of Construction output and new orders as National Statistics due to concerns about the quality of the Construction Price and Cost Indices used to remove the effects of inflation from the statistics.

We took responsibility for the publication of the Construction Price and Cost indices from the then Department for Business, Innovation and Skills (BIS) on 1 April 2015, introducing an interim solution for measuring output prices in June 2015 for all periods from January 2014 onwards.

The impact of improvements to construction statistics article explains and highlights the impact of recent improvements to construction statistics, affecting the nominal data series, output price indices and seasonal adjustment. As a result, the output price indices are no longer considered to be an interim method.

3. Construction output in September 2017

Construction output fell 0.9% during the three-month on three-month period to September 2017. The rolling three-month time series provides a more comprehensive picture of underlying trends in the industry, while the month-on-month series, also shown in Figure 1, shows how volatile construction output can be.

Figure 1: Rolling three-month and monthly all work, September 2017

Chained volume measure, seasonally adjusted, Great Britain

Source: Construction: Output and and Employment - Office for National Statistics

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Construction output fell for the fifth consecutive month in the three-month on three-month time series in September 2017, representing the longest sustained fall in output since October 2012. The fall in output can also be seen in the month-on-month series, with output declining 1.6% in September 2017, following growth of 0.8% in the previous month.

Figure 1 shows that despite these recent consecutive declines, construction output still remains at a relatively high level. Construction output peaked in January 2017, reaching a level that was 29% higher than the lowest point of the last five years, January 2013. Despite continuing to fall in September 2017, construction output remains 25.7% above this level.

In the preliminary gross domestic product (GDP) estimate for July to September 2017 the Quarter 3 (July to September) growth rate for construction output was estimated to be negative 0.7%. This has been revised down by 0.2 percentage points, to negative 0.9%. In comparison with our previous release, growth for both July and August has been upwardly revised by 0.2 percentage points. July growth increased from negative 1% to negative 0.8%, while August growth increased from 0.6% to 0.8%. These revisions have been caused mainly by the receipt of late data.

Figure 2: Components of all work, September 2017

Chained volume measure, seasonally adjusted, Great Britain

Source: Construction: Output and and Employment - Office for National Statistics

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Figure 2 shows that through to mid-2014, all new work, and repair and maintenance followed a similar pattern but since reaching a level peak in August 2014, repair and maintenance has remained relatively stable. Over the same period, all new work has continued to increase steadily, largely down to a rise in new housing work. Throughout the majority of 2017, both all new work, and repair and maintenance are continuing to show a similar trend.

Repair and maintenance fell sharply in the month-on-month series in September 2017, contracting by 2.1% compared with the previous month. All new work also fell 1.3% month-on-month in September 2017, following growth of 1.7% in August 2017. It is worth noting that all new work accounts for approximately two-thirds of all work, while repair and maintenance accounts for approximately one-third.

Figure 3: Difference in three-month on three-month seasonally adjusted volume from the main construction sectors

Great Britain, July to September 2017 compared with April to June 2017

Source: Construction: Output and and Employment - Office for National Statistics

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Figure 3 shows the difference in three-month on three-month volume from the different sectors in terms of real value growth, taken from our seasonally adjusted chained volume measure series.

Construction output fell by £361 million in September 2017. This fall stems predominantly from a £236 million decrease in private commercial new work, as well as a fall of £165 million from total housing repair and maintenance. Elsewhere, the strongest positive contributions to three-month on three-month output came from housing new work, with private housing growing £138 million and public housing expanding by £65 million.

Figure 4: Difference in month-on-month seasonally adjusted volume from the main construction sectors

Great Britain, September 2017 compared with August 2017

Source: Construction: Output and and Employment - Office for National Statistics

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Figure 4 shows the difference in month-on-month volume from the different sectors in terms of real value growth, taken from our seasonally adjusted chained volume measure series.

All work fell by £201 million in September 2017 compared with the previous month. As seen in Figure 4, the month-on-month fall stemmed from falls in housing repair and maintenance, and private commercial work, which fell £97 million and £82 million respectively. Elsewhere, the majority of other sectors remained broadly flat. The most notable positive contributions to month-on-month growth came from private industrial work, which increased by £14 million and new public housing work, which grew by £11 million.

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Total all work decreased to £12,628 million in September 2017. This fall stems from decreases in both all new work, which fell to £8,209 million, and total repair and maintenance, which fell to £4,419 million.

New housing work continued to provide the main upward pressure on construction output in both the three-month on three-month and month-on-year series. Despite contracting on a month-on-month basis, new private housing continued to increase in the three-month on three-month time series and month-on-year series by 1.8% and 5.4% respectively. The relatively smaller new public housing sector has experienced more marked growth, rising 4.9% on a three-month on three-month basis and 14.6% compared with September 2016.

In contrast, the private commercial sector fell across all three time series shown in Table 1. The month-on-year fall of 1.3% was the first contraction in the private commercial sector since September 2015. Unlike new housing, private commercial work also fell month-on-month, contributing to a three-month on three-month fall of 3.1% in September 2017. The largest types of work within private commercial are offices and entertainment work, along with schools, universities and shops.

The latest release of Production in Construction published by Eurostat on 18 October 2017 for August 2017, showed the seasonally adjusted production in the construction sector decreased by 0.2% in the Euro area (EA19) and decreased by 0.4% in the EU28 when compared with July 2017. It should be noted that an accurate comparison cannot be made, as Eurostat data are calculated on a 2010 equals 100 basis, while Great Britain data are calculated on a 2015 equals 100 basis.

Outside the EU, the US Census Bureau release Value of construction put in place was published on 1 November 2017. This includes the total dollar value of construction work done in the US.

The latest Value Added Tax (VAT) turnover research article was published on 1 June 2017, which outlined our plans to use VAT turnover in the compilation of Quarterly National Accounts July to September 2017 and the Index of Services October 2017 bulletins, which are both due for publication on 22 December 2017. In November 2017, a further article will be published which will review the methodological improvements and provide further detail on implementation plans.

Other useful links

7. Quality and methodology

Our Monthly Construction Output Survey measures output from the construction industry in Great Britain. It samples 8,000 businesses, with all businesses employing over 100 people or with an annual turnover of more than £60 million receiving a questionnaire by post every month.